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CalSTRS Submits Comments to the IRS in Advance of Proposed Regulations Defining “Governmental Plan”

CalSTRS has submitted official comments to the IRS in response to the Determination of Governmental Plan Status Advance Notice of Proposed Rulemaking. An advance notice is a mechanism to garner feedback from the public as the IRS develops the proposed regulations.

The forthcoming proposed regulations are meant to define the term “governmental plan” under Internal Revenue Code section 414(d), and determine whether an entity is an agency or an instrumentality of a state or political subdivision and thus eligible to have its employees participate in a governmental plan.

An official proposal from the IRS constitutes one of the first steps in a multi-step federal process that will include:

  • Another public comment period.
  • Further review, analysis and incorporation of the comments.
  • Publication of the final regulations in the Federal Registrar.

The official process can span the course of a year or longer.

CalSTRS has been monitoring the development of the IRS proposal as it is possible that public charter schools in California operated by nonprofit organizations may not be considered agencies or instrumentalities of the state or a political subdivision. Ultimately, this would compel CalSTRS to prohibit the participation of charter schools in its benefit programs so that the CalSTRS programs do not lose their governmental plan status.